Housing starts hot in August: CMHC

The Canada Mortgage and Housing Corp. says while housing starts were up in August, they are expected to slow down in the fourth quarter. — Telegram file photo

St. John’s saw a bump in housing starts in August, according to data released Wednesday by the Canada Mortage and Housing Corporation.

There were 224 single-detached and multiple unit starts in August, compared with 193 in August a year ago. For the year to date, starts are up 13.2 per cent, to 1,431 units, over the 1,264 starts by this time last year.

The yearly increase is due completely to a boom in multiple units — with 607 starts this year compared with 429 to the same point in 2011, they’re up more than 41 per cent.

Chris Janes, the senior market analyst for Newfoundland and Labrador, said the surge in multiple starts is due primarily to the condo market as well as residential rental projects, but he expects things to slow down soon.

“Our recent forecast, which came out in the spring, is for about an 8.5 per cent decline, so we do expect things to slow down in the fourth quarter, in particular with the recent mortgage rule changes that will have a dampening effect on the market.

“We haven’t factored that into our spring forecast, obviously, but we’re factoring that into our fall forecast,” he said. “We think overall we’re going to see starts down in the single-digit area. I don’t think we’re going to have a negative year as we were expecting back in the spring, but I think we’ll probably be flat to five per cent on the upside.”

New mortgage rules were introduced in July that reduced the maximum amortization rate on new insured mortgages to 25 years from 30, as well as reducing the amount lenders could provide in home equity loans to 80 per cent from 85 per cent.

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Brad

September 14, 2012 - 16:09

The problem with your arugment is:
- St. John's isn't a big city...it's not even close to a big city, and even bigger/more desirable cities than St. John's have suffered housing collapses.
- "People will still have to rent" - Not 100% true, quite a few people are having to live at home with their parents in the basement because they are unable to pay the bills by themselves...let alone with another kid. That's when rents will start to decrease.
- You will be in a position to buy when price drops- If you have the cash. Good for you. Congrats. If you have to borrow, well that may be a little difficult. Credit would tighten up faster than a $2 pair of underwear if the market collapsed. Lots of markets around the world have had this happened, and I have no doubt it would happen here too.
- If you are shooting for the higher end properties like you say, those will be taking the hardest hits, both percentage value and dollar value. Past performance in other markets is a great indicator of this. The Dobbins lost a good 25% when they sold a home down in Florida.
PS. Id love to know who you work for and what area you practice law in.

And all the greedy develpoers and realestate agents fill their ever deepening pockets by fanning the flames and artifically driving housing costs and values through the roof.Prices these people charge don't reflect the cost of materials and labour,just the amount they have been overvalued and overinflated.

don't forget investors like myself who buy and sell properties. It is kind of like free money for me, in that because the prices keep going up and up and up. Also note that I pay taxes on the profits that I make, as do the so-called greedy developers and agents. As far as I am concerned, I would love to see the prices go higher and higher until the end of time.

Brad

September 14, 2012 - 07:33

So what happens when other people can no longer afford to buy and sell properties while interest rates go up?
I'll give you a hint: It's gonna be a very ugly ending for you and your family if you got a lot of money tied into real estate...

a business man

September 14, 2012 - 08:27

Brad, there will always be someone looking to buy home in the big cities. First, I will point out that you do raise a good point, but investors can address this point by buying homes in key areas where people will always want to be. Furthermore, when people can not longer to buy, they will still need a place to live and will have to rent. So here, as the owner I become landlord and gets someone else to pay the mortgage for me via rent. Also, if more and more people cannot afford to buy, then the demand for rental units goes up and so will the price for rent (yay for me again!). Lastly, if interest rates go up and people cannot afford to buy, I will be in a good position because the prices will drop, so I can buy cheaper. Yes, there will be less buyers and these buyers will be paying less, but there is still profit to make. Furthermore, the big money to me made is buying homes that are foreclosed. If the interest rates go too high, them many people will end up losing their homes. Then, in will swoop investors like myself to buy these homes from the bank for dirt cheap. So to address your post, yes it could be very ugly for a families who have most of their investments tied into real estate, but I don`t consider myself or my family in this category. Rather, while we do own lots of real estate, we owns all kinds of other businesses and investments around the world, from call centers to fast food chains to gas stations to factories. In addition to all that, I am a lawyer by trade, so I could lose everything tomorrow and still have my great job. That all said, I believe that by investing in properties in and around Canada`s big cities, I have protected myself my a market crash. YES, my real estate holdings will lose lots of value when the rates go up, but the values will not go below what I actually paid, so I will still be ahead. Further, I will be snapping up foreclosed properties when the time is right, so I should make some gains there that should offset my other losses. That all said, I view it at this: I am fueling a bubble that I know will burst because I stand to gain when it bursts. and if it doesn't burst, then I will still own properties that are increasing in value. Win win for me.

HBG

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